Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR) – Review of haircuts on High Quality Liquid Assets (HQLA) and review of composition and run-off rates on certain categories of deposits

RBI/2025-26/27 DOR.LRG.REC.18/03.10.001/2025-26 April 21, 2025 Madam / Dear Sir, Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR) – Review of haircuts on High Quality Liquid Assets (HQLA) and review of composition and run- off rates on certain categories of deposits Please refer to circular DBOD.BP.BC.No.120/21.04.098/2013-14 dated June 09, 2014 on ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ and associated guidelines. Reference is also invited to the draft circular on the subject issued on July 25, 2024, inviting feedback from all stakeholders. 2. The feedback received has been carefully analysed and it has been decided to issue final guidelines as under: i. A bank shall assign an additional 2.5 per cent run-off factor for retail deposits which are enabled with internet and mobile banking facilities (IMB)1 i.e., stable retail deposits enabled with IMB shall have 7.5 per cent run-off factor and less stable deposits enabled with IMB shall have 12.5 per cent run-off factor (as against 5 and 10 per cent respectively, prescribed currently). ii. Unsecured wholesale funding provided by non-financial small business customers (SBCs) shall be treated in accordance with the treatment of retail deposits as at (i) above. iii. Level 1 HQLA in the form of Government securities shall be valued at an amount not greater than their current market value, adjusted for applicable haircuts in line with the margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) as described in RBI circular FMOD.MAOG No.125/01.01.001/2017-18 dated June 06, 2018, as amended from time to time. iv. In case a deposit, hitherto excluded from LCR computation (for instance, a non-callable fixed deposit), is contractually pledged as collateral to secure a credit facility or loan, such deposit shall be treated as callable for LCR purposes and provisions of Sl. No. 9 of annexure to the circular DBR.BP.BC.No.86/21.04.098/2015-16 dated March 23, 2016, shall apply. 3. Reference is also invited to Sl. No. 10 of annexure to circular DBR.BP.BC.No.86/21.04.098/2015-16 on ‘Liquidity Risk Management & Basel III Framework 1 Internet and Mobile Banking facilities (IMB) includes all facilities such as but not limited to internet banking, mobile banking and Unified Payments Interface (UPI) which enables a customer to digitally transfer funds from their account/s.on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ dated March 23, 2016 which provides that deposits from entities such as Hindu Undivided Families (HUFs), partnerships, Association of Persons (AoPs), trusts etc., shall be treated as deposit from ‘other legal entities (OLEs)’ under unsecured wholesale funding category and shall attract run-off rate of 100 per cent, provided they are not treated as SBC for LCR purpose. 4. Based on a review, it has now been decided that OLE category shall consist of all deposits and other funding from banks/insurance companies & financial institutions2 and entities in the ‘business of financial services’3. Thus, funding from non-financial entities such as trusts (educational/religious/charitable), Association of Persons (AoPs), partnerships, proprietorships, Limited Liability Partnerships and other incorporated entities etc., shall be categorised as funding from ‘non-financial corporates’ and attract a run-off rate of 40 per cent (as against 100 per cent currently prescribed4), unless the above entities are treated as SBCs under LCR framework. 5. These amendments would help improve the liquidity resilience of banks in India and would further align the guidelines with global standards while ensuring that such an enhancement is done in a non-disruptive manner. 6. Accordingly, the amendments to extant instructions in the circular dated June 09, 2014, ibid and circular DBR.BP.BC.No.86/21.04.098/2015-16 on ‘Liquidity Risk Management & Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ dated March 23, 2016 are provided in Annex. 7. This circular shall be applicable to all Commercial Banks (excluding Payments Banks, Regional Rural Banks and Local Area Banks). 8. These amendments shall come into force with effect from April 01, 2026. Yours faithfully, (Usha Janakiraman) Chief General Manager-in-Charge 2 Bank may refer to paragraph 4.4.9.1(ii) of Master Circular DOR.CAP.REC.2/21.06.201/2025-26 on ‘Basel III Capital Regulations’ dated April 01, 2025, as updated from time to time, for indicative list of institutions which may be deemed to be financial institutions. 3 As defined in paragraph 3.vi of Master Direction DBR.FSD.No.101/24.01.041/2015-16 on ‘Financial Services provided by Banks’ dated May 26, 2016. 4 In terms of Sl. No 10 of annexure to circular DBR.BP.BC.No.86/21.04.098/2015-16 dated March 23, 2016.1. Circular DBOD.BP.BC.No.120/21.04.098/2013-14 dated June 09, 2014 on ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ A. Amendments to existing text Sr. Reference Existing text Amended text (in track-change mode) No. Paragraph 1 5.4 Level 1 assets of banks would Level 1 assets of banks would comprise of the comprise of the following and following and these assets can be included in these assets can be included the stock of liquid assetsHQLA without any limit in the stock of liquid assets as also without applying any haircut: and shall without any limit as also be valued at an amount not greater than their without applying any haircut: current market value. Provided that with effect from April 01, 2026, Level 1 HQLA in the form of Government securities shall attract haircuts in line with those prescribed under Liquidity Adjustment Facility and Marginal Standing Facility as per RBI circular FMOD.MAOG No.125/01.01.001/2017- 18 dated June 06, 2018 and as amended from time to time. Level 1 assets are limited to the following…… B. Amendments to BLR 1: Statement on Liquidity Coverage Ratio (LCR) Name of the Bank Reporting Frequency Monthly Position as on (Amount in Rupees crore) I II III IV V (III*IV) Panel I High Quality Liquid Assets (HQLA) Unweighted Factor Weighte Amount Multiplier d (per cent) Amount Level 1 Assets 1 Cash in hand 100 2 Excess CRR balance 100 3 Government Securities in excess of minimum SLR requirement1 100 4 Government securities within the mandatory SLR requirement, to 100 the extent allowed by RBI under MSF1 5 Marketable securities issued or guaranteed by foreign sovereigns 100 having zero per cent risk-weight under Basel II Standardised Approach (country-wise details to be provided under memo item no 1) 6 Facility to Avail Liquidity for Liquidity Coverage Ratio1 100 7 Total Level 1 Assets (1+2+3+4+5+6) 8 Add amount lent under a reverse repo transaction undertaken for 100 up to and including 30 days in repo-eligible non-Level 1 assets (irrespective of whether they qualify as Level 2 assets or not) 9 Deduct amount borrowed under a repo transaction undertaken for 100 up to and including 30 days in repo-eligible non-Level 1 assets (irrespective of whether they qualify as Level 2 assets or not) 10 Total Adjusted Level 1 Assets (7+8-9) 1 Unweighted amount for Level 1 HQLA in the form of Government Securities to be included in BLR 1 shall be after application of haircuts in line with LAF/MSF. This unweighted amount will be applied 100 per cent factor multiplier.Level 2 Assets Level 2A Assets 11 Marketable securities representing claims on or claims guaranteed 85 by sovereigns, Public Sector Entities (PSEs) or multilateral development banks that are assigned a 20 per cent risk weight under the Basel II Standardised Approach for credit risk and provided that they are not issued by a bank/ financial institution/ NBFC or any of its affiliated entities. (issuer-wise details to be provided under memo item no.2) 12 Corporate bonds, not issued by a bank/ financial institution/ NBFC 85 or any of its affiliated entities, which have been rated AA- or above by an Eligible Credit Rating Agency. 13 Commercial Papers not issued by a bank/ PD/ financial institution 85 or any of its affiliated entities, which have a short-term rating equivalent to the long-term rating of AA- or above by an Eligible Credit Rating Agency. 14 Total Level 2A Assets (11+12+13) 15 Add market value of repo-eligible Level 2A securities placed as 85 collateral under a repo transaction undertaken for up to (and including) 30 days. 16 Deduct market value of repo-eligible Level 2A securities acquired 85 as collateral under a reverse repo transaction undertaken for up to (and including) 30 days. 17 Total Adjusted Level 2A Assets (14+15-16) Level 2B Assets 18 Marketable securities representing claims on or claims guaranteed 50 by sovereigns having risk weights higher than 20 per cent but not higher than 50 per cent 19 Common Equity Shares not issued by a bank/ financial institution/ 50 NBFC or any of its affiliated entities and included in NSE CNX Nifty and/ or S&P BSE Sensex indices 19A Corporate debt securities (including commercial paper) 50 20 Total Level 2B Assets (18+19+19A) 21 Add market value of repo-eligible Level 2B securities placed as 50 collateral under a repo transaction undertaken for upto (and including) 30 days. 22 Deduct market value of repo-eligible Level 2B securities acquired 50 as collateral under a reverse repo transaction undertaken for upto (and including) 30 days. 23 Total Adjusted Level 2B Assets (20 + 21 -22) 24 Total Stock of HQLA = Level 1 (Unadjusted) + Level 2A(Unadjusted) + Level 2B(Unadjusted)-Adjustment for 15 per cent cap - Adjustment for 40 per cent cap Where: Adjustment for 15 per cent cap = Max (Adjusted Level 2B- 15/ 85*(Adjusted Level 1 + Adjusted Level 2A), Adjusted Level 2B - 15/ 60*Adjusted Level 1,0) Adjustment for 40 per cent cap = Max ((Adjusted Level 2A + Adjusted Level 2B-Adjustment for 15 per cent cap) - 2/ 3*Adjusted Level 1 assets,0) [Note-Only Weighted Amounts of various assets to be taken for this formula] 25 Adjustment in HQLA to reflect liquidity transfer restrictions (applicable for banks operating in multiple jurisdictions) -Details in Memo item 3 26 Consolidated Total Stock of HQLA Panel II Sl no Net Cash outflows over the 30 days period Unweighted Run-off Weighte amount factors (in d per cent amount A. Cash Outflows 1 Retail Deposits [(i) + (ii)] 1.(i) Stable deposits 51.i.a Deposits with IMB2 7.5 1.i.b Deposits without IMB 5 1.(ii) Less stable deposits 10 1.(ii).a Deposits with IMB 12.5 1.(ii).b Deposits without IMB 10 2 Unsecured wholesale funding [(i)+(ii)+(iii)+(iv)]: 2.(i) Demand and term deposits (less than 30 days maturity) provided by small business customers [(a) + (b)] 2.(i).a Stable deposits 5 2.(i).a.i Deposits with IMB 7.5 2.(i).a.i Deposits without IMB 5 i 2.(i).b Less stable deposits 10 2.(i).b.i Deposits with IMB 12.5 2.(i).b.i Deposits without IMB 10 i 2.(ii) Operational deposits generated by clearing, custody and cash management activities [(a) + (b)] 2.(ii).a Portion covered by deposit insurance 5 2.(ii).b Portion not covered by deposit insurance 25 2.(iii) Non-financial corporate3, sovereigns, central banks, multilateral 40 development banks, and PSEs 2.(iv) Funding from other legal entity customers (This category shall 100 consist of all deposits and other funding from banks/insurance companies & financial institutions4 and entities in the ‘business of financial services’5 not included above.) 3 Secured Funding [(i) + (ii) + (iii) + (iv)]: 3.(i) Secured funding transaction with RBI/ central bank or backed by 0 Level 1 assets with any counterparty 3.(ii) Backed by Level 2A assets with any counterparty 15 3.(iii) Backed by Level 2B assets with any counterparty 50 3.(iv) Any other secured funding 100 4 Additional requirements [(i) +(ii) +(iii) +(iv) +(v) +(vi) +(vii) +(viii) +(ix)+(x)+(xi)] 4.(i) Net derivative cash outflows 100 4.(ii) Liquidity needs (e.g., collateral calls) related to financing 100 transactions, derivatives and other contracts where - downgrade triggers - up to and including a 3-notch downgrade 4.(iii) Market valuation changes on derivatives transactions (largest 100 absolute net 30-day collateral flows realised during the preceding 24 months) based on look back approach 4.(iv) Increased liquidity needs related to the potential for valuation 20 changes on non-Level 1 posted collateral securing derivatives 4.(v) Increased liquidity needs related to excess non-segregated 100 collateral held by the bank that could contractually be called at any time by the counterparty 4.(vi) Increased liquidity needs related to contractually required collateral 100 on transactions for which the counterparty has not yet demanded the collateral be posted 4.(vii) Increased liquidity needs related to derivative transactions that 100 allow collateral substitution to non-HQLA assets 4.(viii) ABCP, SIVs, SPVs etc. maturing within the 30 days period [(a)+(b)] 4(viii)a liabilities from maturing ABCP, SIVs, SPVs, etc. (applied to 100 maturing amounts and returnable assets) 4(viii)b Asset Backed Securities applied to maturing amounts 100 4.(ix) Currently undrawn committed credit and liquidity facilities6 provided to [(a)+(b)+(c)+(d)+(e)+(f)+(g)] 4(ix).a retail and small business clients 5 2 Internet and Mobile Banking facilities (IMB) includes all facilities such as but not limited to internet banking, mobile banking and Unified Payments Interface (UPI) which enables a customer to digitally transfer funds from their account/s. 3 Includes funding from non-financial entities such as trusts (educational/religious/charitable trusts), Association of Persons (AoPs), partnerships, proprietorship, Limited Liability Partnerships and other incorporated entities etc.. 4 Banks may refer to paragraph 4.4.9.1(ii) of Master Circular DOR.CAP.REC.2/21.06.201/2025-26 on ‘Basel III Capital Regulations’ dated April 01, 2025, as updated from time to time, for indicative list of institutions which may be deemed to be financial institutions. 5 As defined in paragraph 3.(vi) of Master Direction DBR.FSD.No.101/24.01.041/2015-16 on ‘Financial Services provided by Banks’ dated May 26, 2016 6 Excluding unconditionally revocable and unconditionally cancellable facilities, which will be covered under Sl. No. 4.(x) ‘other contingent funding facilities’.4.(ix).b non-financial corporates, sovereigns and central banks, multilateral 10 development banks, and PSEs - Credit facilities 4.(ix).c non-financial corporates, sovereigns and central banks, multilateral 30 development banks, and PSEs - Liquidity facilities 4(ix).d Banks 40 4.(ix).e Other financial institutions (including securities firms, insurance 40 companies) - Credit facilities 4.(ix).f other financial institutions (including securities firms, insurance 100 companies) - Liquidity facilities 4(ix).g other legal entity customers 100 4.(x) Other contingent funding liabilities [(a) + (b) + (c)] 4.(x).a Guarantees, Letters of credit and Trade Finance 3 4.(x).b Revocable credit and liquidity facilities 5 4.(x).c Any other 5 4.(xi) Any other contractual outflows not captured elsewhere in this 100 template B. Total Cash Outflows (1+2+3+4) C. Cash Inflows 1. Maturing secured lending transactions backed by the following collaterals [(i) + (ii) + (iii)] 1.(i) With Level 1 assets 0 1.(ii) With Level 2A assets 15 1.(iii) With Level 2B assets 50 2 Margin Lending backed by all other collateral 50 3 All other assets 100 4 Lines of credit - Credit or liquidity facilities or other contingent 0 funding facilities that the bank holds at other institutions for its own purpose 5 Other inflows by counterparty [(i) + (ii) + (iii)] 5.(i) Retail and small business counterparties 50 5.(ii) Amounts to be received from non-financial wholesale 50 counterparties, from transactions other than those listed in above inflow categories 5.(iii) Amounts to be received from financial institutions and RBI/ central 100 banks, from transactions other than those listed in above inflow categories 6 Net derivatives cash inflows 100 7 Other contractual cash inflows (please specify as footnotes) 50 D. Total Cash Inflows [1 + 2 + 3 + 4 + 5 + 6 + 7] E. Total Cash Outflows less Total Cash Inflows [B-D] F. 25 per cent of Total Cash outflows [B*0.25] G. Total Net Cash Outflows [Higher of E or F] Liquidity Coverage Ratio 𝑇𝑜𝑡𝑎𝑙 𝐻𝑄𝐿𝐴𝑠 (𝑖𝑡𝑒𝑚 26 𝑖𝑛 𝑃𝑎𝑛𝑒𝑙 1)∗100 𝑇𝑜𝑡𝑎𝑙 𝑁𝑒𝑡 𝐶𝑎𝑠ℎ 𝑂𝑢𝑡𝑓𝑙𝑜𝑤𝑠 (𝐼𝑡𝑒𝑚 𝐺 𝑖𝑛 𝑃𝑎𝑛𝑒𝑙 2) Memo Item Investment in securities issued or guaranteed by zero per cent risk weighted foreign No. 1 sovereigns, as reported at S.No. 5 under Panel I above – country-wise break up to be provided below: Serial No Name of the Country Amou nt 1 2 Memo Item Investment in securities representing claims on or claims guaranteed by sovereigns, No No. 2 PSEs or multilateral development banks that are assigned a 20 per cent risk-weight, as reported in S. No. 11 under Panel I above – Issuer-wise break up to be provided below:Serial No Name of the Issuer Amou nt 2.1 Foreign Sovereigns (give Country names) (i) (ii) 2.2 Public Sector Entities (PSEs) (i) (ii) 2.3 MDBs, BIS, IMF (i) (ii) Memo Item Name of the subsidiary and amount for the adjustment done in HQLA to reflect liquidity No. 3 transfer restrictions. Serial No Name of Subsidiary Amou nt 3.1 3.22. Circular DBR.BP.BC.No.86/21.04.098/2015-16 on ‘Liquidity Risk Management & Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ dated March 23, 2016 A. Amendments to existing text Sr. Reference Existing text Amended text (in track-change No. Para mode) 1 Sl. No. 9 of Banks generally allow loans against a. Banks generally allow loans against annexure deposits of customers. If a deposit is deposits of customers. If a deposit is contractually pledged to a bank as contractually pledged to a bank as collateral to secure a credit facility or collateral to secure a credit facility or loan granted by the bank that will not loan granted by the bank that will not mature or be settled in the next 30 mature or be settled in the next 30 days, days, then banks may exclude such then banks may exclude such pledged pledged deposit from the LCR deposit from the LCR calculation, i.e. calculation, i.e. outflows, only if the outflows, only if the following conditions following conditions are met: are met: •the loan will not mature or be settled •the loan will not mature or be settled in in the next 30 days; the next 30 days; • the pledge/lien arrangement is •the pledge/lien arrangement is subject subject to a legally enforceable to a legally enforceable contract contract disallowing withdrawal of the disallowing withdrawal of the deposit deposit before the loan is fully settled before the loan is fully settled or repaid; or repaid; and and •the amount of deposit to be excluded • the amount of deposit to be excluded cannot exceed the outstanding cannot exceed the outstanding balance balance of the loan (which may be the of the loan (which may be the drawn drawn portion of a credit facility). portion of a credit facility). The above treatment does not apply b. The above treatment does not apply to a deposit which is pledged against to a deposit which is pledged against an an undrawn facility, in which case the undrawn facility, in which case the higher of the outflow rate applicable to higher of the outflow rate applicable to the undrawn facility or the pledged the undrawn facility or the pledged deposit applies. deposit applies. c. In case a deposit, hitherto excluded from LCR computation (for instance a non-callable fixed deposit), is contractually pledged as a collateral to secure a credit facility or loan, such deposit shall be treated as callable for LCR purposes and provisions of above paras (a) and (b) shall apply.